J.D. Irving Limited (JDI) Business Analysis

J.D. Irving Limited (JDI) line of commercial enterprise AnalysisJ.D. Irving Limited (JDI) is a 128 year aged organization, based out of New Brunswick, Canada. This organization have over 15,000 employees with business units in Transportation, Shipbuilding Industrial Marine, Forest and Forestry Products, Retail, Industrial Equipment, Construction Services and building Materials, and Consumer Products.Their cherish principles include uncompromising lineament, committed service to consumers focus on continuous improvement and innovation, positive influence to communities and ensuring a sustainable environment.Family values go out strong-hold of current business lines, and the management is averse to spinning-off or divesting non-contributing business units, due to outdated corporate philosophy.Horizontal diversification al broken ined JDI to routine their resources efficiently, and induce economies of measure and scope. upended diversification runs parallel with the historica l play along strategy to scale up to a business, from inception to launch including retailing of the product, and its backing infrastructure.Even though in that respect are many an(prenominal) pointers across the organization that suggest a restructuring is to be done on the current organizational structure, their current strategies have ensured a immutable level of success over the years and the presence of multiple business lines, have ensured that no one business line goes out of business, with the introduction of the cross-selling conceit. We olfaction that J.D. Irving has passed the better-off test, but not with flying colors. As a part of our recommendation, we believe that a few non- perfume business lines would need to be divested, and they would need to focus on streamlining and reducing costs, with increased efficiencies across business lines, with the possibility of looking into emerging markets to either off-shore or outsource split of their businesses, which wou ld in-turn reduce costs and increase net profit share.Company AnalysisJ.D. Irving, Limited (JDI) is a diverse family declareed company with operations in Canada and the United States. For over 125 years, their focus has been on providing quality service and products to customers in Americas and Europe. Although its roots are in forestry and farming, JDI is nowadays diverse group of companies, including that continues to make such(prenominal) forest products as paper, pulp, lumber, and corrugated material for packaging. JDI has spread out in transportation, shipbuilding, industrial services, construction, retail and food processing. In minimal brain dysfunctionition, the company owns Brunswick News nearly monopoly in regional media. With a focus on creating an aligned and tenanted workforce across various industries, JDI offers both internal and external competency-based development, tailored to individual needs. Their way of doing business includes effective communications, fa irness, dynamic leadership, healthy corporate ending and work/family policies. The use of Lean and Six-Sigma methodologies combined with a strong focus on team and employee engagement is what drives their culture of Finding a Better Way, any Day.iThis report closely examines the JDI Groups corporate strategy / rationale and identifies the main issues faced by JDI with appropriate recommendations from our analysis.The Irving Family ValuesAs a family stronghold, the Irvings have amassed a large fortune, and rank 212 on Forbes 2010 billionaire listii. They have managed to life together a group of 250 privately-owned companies, worth over $7.1 Billion, intact, with plans to restructure to cater to the ambitions of a impertinent contemporaries of Irving owner-managers. Irving Oil, was founded by K.C. Irving, and has been run separate of the rest of the group for decades. (Management Hierarchy- Exhibit 1)When James Durgavel Irving started and K.C. Irving authentic the company, they faced very few competitors, and preferred to be their own customer, a philosophy still intimately fol offseted by the current generation of owners. K.C. Irving was a master of perpendicular integration. The ideology of forming a company, to be write out a supporting pillar for their core businesses was instilled in the early 1900s, and is still a major component of their success to this day. K.C Irvings three sons, James (J.K.) handled the Forestry business, Arthur handled the Oil business, and Jack handled the Construction unit. This generation never strayed away from the resource-based, core industries that have generated the Irvings billions.iiiThe Irvings were are core capitalists by nature they rarely buy and sell, prefer to build from scratch and usually keep what theyve built. Their corporate culture revolved around efficiency and speed, in terms of decision-making, another aspect which entailed managing the empire within the family and not going public.Corporate rationaleA cross the years, the Irving business has diversified and integrated, resulting in the current mix of seven industries Forestry Forest Products, Transportation, Shipbuilding Industrial Marine, Retail Distribution, Industrial Equipment, Construction Services construct Materials, Specialty Printing, and Consumer Products (Exhibit 2). Irving Oil, being out of scope of this report, has also affected synergies and development of particular JDI transport and logistics businesses.Various factors have contributed to JDIs current business processes. An insufficiently developed business environment and infrastructure, in the early 1900s, in East Canada, resulted in the need to create missing value chain elements. Control over the immaculate value chain, in addition, allowed JDI to sustain high quality of their products, strike with insufficient and/or expensive distribution processes. Horizontal diversification, on other hand, allowed JDI to use their resources efficiently, and create economies of scale and scope. Initially, JDIs competition in New Brunswick should have been fragmented and irrelevant, allowing the company to gain competitive advantage, across their business portfolio. The company diversified into industries such as Transport, to support their core businesses. For a family business, diversification gives an opportunity to hedge risk, associated with commodities and concentration mainly in a single geographic region (Canada and Northern parts of the US). (JDI business structure Exhibit 23)Vertical IntegrationJ.D. Irving has multiple business units which associate to and piggy-back on each other. This runs parallel with the historical company strategy to scale up to a business, from inception to launch including retailing of the product, and its supporting infrastructure. The company assumed ownership of a business from end-to-end. From our analysis, we can infer that for the Forest Business line, The Forest Management formed the core which branche d out into Pulp and Lumber. Pulp meshed with Corrugating Mediums, Tissue and Paper which in turn corresponded to retail companies such as Chandler (Packaging), Irving Tissue and Plasticraft respectively. It is likely, that Irving paper is used to print Brunswick News magazines. The Lumber division corresponded to Shamrock Truss, Kent and Kent Homes (having its own correlations with Gulf Operators Atlantic Wallboard). Parallel to this was the Shipbuilding vertical with sub units of Marine Construction (with correlations to Harbour Development and Heavy Equipment), Ship yards (with correlations to Kent Line and JDI Logistics), Atlantic Towing and Facilities, Technical and MSPV Services arms. To support distribution of the respective lines, a Transportation Logistics vertical comprised of Midland, RST Industries (correlating to Universal Truck Trailers), and Sunbury and NB Railways (supporting the lumber industries). The only department holistically shared across the board, accordin g to our research, is a common Information engine room Department.ivHorizontal variegationUnrelated DiversificationJDI owns businesses starting from forestry and ending with retail of consumer goods, French-fries, railways and port services. While they all make the Irving Group, operating environment and coordination of individual businesses force be relatively autonomous. Some businesses, such as personal care products, are little related to any of Irvings core branches.JDIs unique geographic pickle and ability to acquire large capital over clip helped the company to be significantly superior to its competitors, and gave advantage to make long-term, capital intensive investments. Irvings also to large extent control the general business environment in New Brunswick, employing one in 12 workersvand owning most of regional media presence in diverse businesses helps to increase their influence.Few other factors give advantage to their chosen diversification plan JDI family busine ss culture, and strong capabilities of its members to build and force outen businesses.Related DiversificationDespite the initial diverse categories, almost all of JDIs businesses are grouped under four main categories forestry, vegetable oil, shipbuilding, and transport, which connect with each other. This allows JDI to be better off, by making wood a multi-purpose asset allowing them to employ synergies of resources. For instance, pulp and lumber businesses use the same resource from JDI forestry operations. Similarly corrugating medium, tissue and paper businesses all use inputs from JDIs pulp business, while Kent, Kent Homes, and Shamrock Truss all use lumber. Additionally, JDI has strong brand and company reputation to extend it to other businesses.Cross-selling (one-stop-shop)// BrandLooking at JDIs corporate structure, the company tends to full-of-the-moony own its businesses. Probably, this has developed historically with an insufficient institutional context. Nowadays, t aking into account, that JDI owns entire value chains, being a private company, they have a full control over information and resource allocation amongst their businesses.Over the years, JDI has strategically placed itself as an important business empire in Canada. But this has come at a cost. They have been constantly rebuked and pulled to judicatory due to environmental concerns, caused by costly mistakes, but their holistic corporate outlook towards the environment and affable responsibility have negated the effects of these pitfalls.RecommendationsOver the years, JDI has strategically placed itself as an important business empire in Canada. The companys businesses are well integrated and diversified, enceinte JDI opportunity to solve challenges, which came across in different meters, and eventually presence in many strategically important industries in New Brunswick (Exhibit 4).Due to omit of financial information, we cannot pointedly suggest divestures or spin-offs of any business lines. However, we feel that JDI should be less diverse and control its current portfolio to suit todays business needs. The hear has reduce over time, for example, with the acquisition of a diaper company.JDI as a corporate parent can add workable value to its businesses by place into sustainable expertise. The corporate concept of not selling businesses might lead to sustained losses over time. With the state of the current global economy and with the prices of oil being drastically low as compared to a few years ago, running end-to-end businesses in Forestry, Shipping and Transportation makes little sense, especially when many of the processes can be outsourced or off-shored, to emerging markets, where low costs of labor and raw materials, would substantially increase profit margins.Our recommendation would be to retain the core oil and ship-building businesses, with some core aspects of logistics and consumer products and equipment manufacturing to be move to less c ostly markets, so as to increase overall gross margins. They would need to divest non-core businesses, which were aimed at short-term profits and look to create a sustainable company. For J.D. Irving, philosophies and policies should be formulated in a way that they can be strategically changed with time and environment.Over the years, JDI has strategically placed itself as an important business empire in Canada. But this has come at a cost. They have been constantly rebuked and pulled to court due to environmental concerns, caused by costly mistakes, but their holistic corporate outlook towards the environment and social responsibility have negated the effects of these pitfalls. Due to neediness of financial information, we cannot pointedly suggest divestures or spin-offs of any business lines. However, we feel that JDI should be less diverse and control its current portfolio to suit todays business needs. The address has diluted over time. JDI as a corporate parent can add workab le value to its businesses by investing into sustainable expertise. The corporate concept of not selling businesses might lead to sustained losses over time. With the state of the current global economy and with the prices of oil being drastically low as compared to a few years ago, running end-to-end businesses in Forestry, Oil, Shipping and Transportation makes little sense, especially when many of the core processes can be outsourced or off-shored, to emerging markets, where prices of labor and raw materials, would substantially increase profit margins. The management has made some efforts into moving into international markets, but they have diluted their core businesses by moving into potato production and diaper companies. Our recommendation would be to retain the core oil and ship-building businesses, with some core aspects of logistics and consumer products and equipment manufacturing to be moved to less costly markets, so as to increase overall ROI. They would need to dives t non-core businesses, which were aimed at short-term profits and look to create a sustainable company and to not restrict themselves with a policy of corporate philosophy. Philosophies and policies should be formulated in a way that they can be strategically changed with time and environment.Irving Corporate ScopeJ.D. Irving key strengthsS1 Business DiversificationS2 Long term focus, fast and concentrated decision making processS3 Overall control of business environment in New BrunswickS4 Patent family capital and financial capacityS5 Economies of scope and scaleS6 Strong corporate cultureJ.D. Irving key weaknessesW1 Difference in business profitability in vertical value chainsW2 Family dynamics potential conflict amongst 4th generation membersW3 Unclear boundaries between family and business interests hear opportunitiesO1 Divesting non-performing assets and offshoring labor intensive processes to emerging marketsO2 High barriers to entry many JDI industriesO3 Proximity to major e conomies like the US and EuropeS1, S4, S5, S6, Q1, Q3 JDI business diversification and financial strength allows the company to capitalize on close proximity to main developed markets, while gives an opportunity to offshore businesses to emerging marketsCreate synergy between low cost manufacturing and operations, and established access to profitable marketsW2, W3, Q2 Various aspects of family relations and interests might negatively affect JDI developmentUse the companys strengths, such as low competition, to overtake family related inefficienciesKey threatsT1 Volatility and cyclic performance in global wood, paper and faming industriesT2 Declining revenues in shipping industryT3 change magnitude operating costs and overheadsT4 Increasing competition in transport industryS2, S3, T1, T2, T4 JDI business diversification and low competition in the regional market can help the company to deal with higher risks, volatility and declining revenues in a short termMaintain business portfo lio, which allows to avoid cyclical downturns in particular industriesW1, T3 Less attractive value chain parts can harm JDI long term profitabilityEvaluate profitability of all business processes and outsource those, which do not add value to the companySource JDI analysis, IBIB World industry reports for paper, oil, and transport industries